Decision Tree Problems

You have sued your employer for wrongful termination. They are offering a settlement of $70,000. The alternative is to go to trial, at a cost of $20,000. Your lawyer tells you that there are two possibilities: (1) you win, in which case you can expect an award of S100,000, or (2) you lose, in which case you get nothing. She thinks that there is a 60% chance that you will win

a. List the options that you have and the possible outcomes.

b. If all you care about is your expected wealth (and prefer more wealth to less), find the optimal decision.